Lebanon aims to restart offshore oil exploration
Beirut - Lebanese Foreign Minister Gebran Bassil announced plans to move ahead with a stalled auction for offshore exploration by international energy companies.
The auction, originally scheduled for November 2013, was delayed as the government had failed to pass necessary decrees to demarcate the exploration blocks, approve the model production-sharing contracts and define the tender protocols.
The Lebanese Petroleum Administration qualified 12 international oil companies as operators in early 2004 and more than 30 international oil firms were qualified by the administration, a level of interest higher than Cyprus and Israel which may also have significant levels of oil and gas in neighbouring waters.
The delay of the Lebanese bidding process caused several companies to lose interest, however, and several closed their offices in Beirut.
In addition to the delay, companies may have been put off by the relatively high expense of exploration and drilling in the eastern Mediterranean, where water depths are 4,600-6,100 metres. There are also many opportunities for gas exploration in nearby areas.
The eastern Mediterranean also has geostrategic risks. There is the Arab-Israeli conflict, reflected in two-related issues — Israel blocking the development of the Gaza Marine Field and the disputed offshore area between Lebanon and Israel. There are disputes both south and north of Lebanon.
Seismic surveys of Lebanese waters provided optimistic expectations of gas discoveries. Proven petroleum reserves cannot be confirmed until drilling exploration programmes are implemented. If major discoveries are found, then oil firms will become more interested in further exploration.
Problems could arise in fields that straddle borders. Officially there is a state of war between Lebanon and Israel and the countries have no diplomatic relations. It would be difficult to unify operations in a joint field.
The risks are varied and complex. Some southern Lebanese blocks reach into disputed areas with Israel. The southernmost Syrian block passes into Lebanese northern waters.
The United States has been mediating the resolution of the disputed area between Israel and Lebanon for three years but no settlement has been reached. The offshore border dispute with Syria is part of a long onshore-offshore demarcation dispute between the two countries. This issue is not expected to be resolved during the present Syrian civil war.
Gas exploration in the eastern Mediterranean started in Egypt in the 1990s and is ongoing in Palestinian, Israeli and Cypriot territorial waters. Major discoveries have been found in Egypt and Israel. Modest discoveries have been made in Palestinian and Cypriot waters.
Egypt and Israel are producing gas from the eastern Mediterranean. Egypt has converted most of its power stations to run off gas, as well as beginning an ambitious export programme. Israel began producing gas from the Tamar field in the spring 2013. It is planning to export to regional and European countries.
Eastern Mediterranean gas is expected to play an important role in the economic futures of producing countries, particularly if it is consumed locally. Domestic gas would help the producing country’s balance of payments, as the gas would replace the oil imports. Gas would also reduce pollution.
Eastern Mediterranean gas reserves are estimated to constitute about 1% of global reserves. This volume should provide ample supply for local consumption. It could also provide modest quantities to the European market.
Europe is considering increasing gas imports and diversifying the sources of its supplies away from Russia. Eastern Mediterranean gas is one of the sources that Europe is considering.
Lebanon could contribute to the volumes exported to Europe. Exports could be transported by pipeline or as liquefied natural gas (LNG). The volume to be exported will depend on the amount of reserves discovered and Lebanon’s extent of domestic use of gas.